The first month of the year saw cratering trust in government amidst seemingly endless covid-19 lockdowns, the purging of conservatives from social media sites, and President Biden’s inauguration, which as many as 35% of voters and 75% of Republicans believe is unearned. Now, trust in financial institutions is cratering as well.
Last Thursday several brokerages halted trading on assets like GameStop and AMC Entertainment after a group of retail investors on the WallStreetBets Reddit forum devised a plan to drive up the price of heavily shorted stocks, forcing hedge funds in short positions to lose billions of dollars. One of those targets was prominent Hedge Fund Melvin Capital, which lost a jaw-dropping 53% in January.
The move by brokerages to shut down trading on these assets, arguably to protect the hedge funds from further losses, drew accusations of injustice from retail traders and political figures including Alexandria Ocasio-Cortez and Elizabeth Warren on the left and Ted Cruz and Newt Gingrich on the right.
William LeGate, a Gen Z entrepreneur who has been following the WallStreetBets forum with interest was quick to draw parallels between the Occupy Wall Street uprising, and the politics of the GameStop saga.
“People were willing to take a risk on Trump and now they’re willing to take a risk in the markets. A lot of people just want to see the world burn right now, and they’re enjoying watching it happen.”
“This is Occupy Wall Street Part 2”, LeGate told CNBC, “but this time it is on their turf, and there are real financial consequences.” He continued, “People were willing to take a risk on Trump and now they’re willing to take a risk in the markets. A lot of people just want to see the world burn right now, and they’re enjoying watching it happen.”
Gingrich is one of the more prominent names on the right to draw a parallel between the retail investor uprising last week and the left-wing populist Occupy Wall Street sentiment of a decade or so ago.
“What you’re seeing is an almost spontaneous cultural reaction in which the little guys and gals are getting together and going after the bigs, so the bigs are having to rig the game in order to survive.”
“It’s not about Republicans and Democrats,” Gingrich told the New York Times. “It’s lots and lots of normal, everyday people who began to figure out they really got ripped off for the last year just like they got ripped off in 2008 and 2009.” He continued, “What you’re seeing is an almost spontaneous cultural reaction in which the little guys and gals are getting together and going after the bigs, so the bigs are having to rig the game in order to survive.”
The intensely populist undercurrent of the GameStop event has not been lost on Mitch McConnell’s former chief of staff Josh Holmes, who has watched the GOP wrenched from the establishment under Trump.
“This is a social and economic moment in our society.”
“This is a social and economic moment in our society”, Holmes told CNBC Thursday. “There are a few times when you can definitely point to a moment and say society has changed, and this is one of them.”
The financial and cultural implications of this anti-elitist sentiment extend far beyond Wall Street, and foreshadow an increasingly populist political environment.
Confidence in the economy overall took a nosedive in January according to Gallup and was largely driven by cratering Republican trust. Gallup’s Economic Confidence Index saw a five-point decline to -21 in January, putting it at a level not seen since June of 2020 when covid-19 lockdowns forced millions from the workforce.
Among Republicans, economic confidence has been sliding downward since the election. It dropped down to +44 in November, then hit +29 in December and now sits at -2, putting it in the negative for the first time since 2016 according to Gallup.
A Gallup poll taken just after Biden took office, and days after the insurrection at the U.S. Capitol, shows the percentage of Americans citing government and politicians as the main issue facing the country rose steeply to 29%, up from 20% a month earlier.
The same survey found Americans stating national discord is the number one issue facing the country more than doubled, from 5% in December to 12% in late January.
As Market Research Foundation pointed out last week, 32% of voters nationwide say Biden did not win the election legitimately, and among those who dispute Biden’s win, 73% say there is solid evidence to support this view.
What is more, 40% of Americans say they have little to no trust in the integrity of the election process, and over a third of Americans hold that Trump is still the rightful winner of the 2020 election, with close to 75% of Republicans maintaining this view.
The Crisis of Legitimacy Market Research Foundation warned of last week is only accelerating, and bleeding into institutions beyond the government.
As economic disparities increase and globalism destroys local economies and national sovereignty, expect to see populism on the rise, and a convergence of populist attitudes on both the left and the right.
This populism may very well take the form of the political left continuing to push for UBI and higher corporate taxes, and the right demanding lower taxes for the middle class, a reduction in foreign spending, fines for offshoring jobs, and an end illegal immigration. We may also see a convergence of priorities on reduced foreign intervention, and rekindled interest in term limits to remove inept politicians.
What is abundantly clear is the 2020’s will be a decade defined by populism, and while former President Trump played a role in the rise of populism with his America First rallying cry, this shift extends far beyond Trump.